Ethics in Procurement: What are you doing to keep procurement ethical?
Being ethical means being in accordance with the rules or standards for right conduct or practice, especially the standards of a profession. Ethics play a major role in procurement and with the increasing use of technology and consumer behavior changes, it’s something to take seriously as an organization. An example of how ethics comes into play in procurement is in supplier selection, evaluation, negotiation and ultimately awarding business. Throughout the process, procurement professionals need to ensure they’re treating them in a fair and unbiased manner.
Failing to abide by ethical standards can lead to immoral and illegal practices such as bribery, favoritism and illegal sourcing. This in turn can lead to several repercussions including lack of faith from customers, potential PR disaster and even customer churn. Leaders must make sure that actions are taken to ensure your organization is ethical before procurement professionals will be able to contribute to the success of your business.
Ethics practices influence the role of procurement professionals in many ways including;
- They could experience enormous pressure from internal and external forces to act in unethical ways as they often have control of the budget.
- Helping them to establish a long-term relationship with suppliers. Any unethical behavior towards suppliers could have a negative impact on the brand image of the organization.
- Being unethical once could impact an individual’s entire career – even if it was by mistake.
Types of unethical behaviors:
Accepting supplier favors and gifts
Accepting gifts, favors, and freebies from suppliers is the most common unethical practice. This may affect buyer’s decision to evaluate and select a supplier.
Conflict of interest
Conflicts of interest arise when buyers or their close family/friends have direct financial interest in a supplier’s organization.
Confidentiality of information
Confidential information should be shared only when needed and with the persons who are liable to get the same as part of their profession. There are various kinds of information that need to be protected; otherwise it could hamper the business adversely. Some of the examples are pricing, T&Cs, personnel information of customers, any business and trade secrets – learn more about this in our procurement course catalog.
Fair and unbiased treatment
All suppliers should be treated fairly and in an unbiased manner.
So, what can leaders do to ensure your organization’s procurement ethics are upheld?
An ethics policy
An ethics dispute should never be the result of a difference of opinion between the procurement department and a company employee. Every organization should have a written policy clearly stating what is and is not acceptable.
Ethics training is one of the most essential components to ensure that employees are aware of the importance of ethical practices. An innovative training will provide employees with all the important information about ethics so that they are able to deal with their day-to-day jobs in an ethical way. The great part about having an ethics policy is that the rules are in a tangible, indisputable form – but will they be read? Supplement an ethics policy with training for anyone who is involved with the purchase of products or services and/or who meets with suppliers.
Periodically, audits should be performed to verify that all procurement activities were conducted ethically and in accordance with procedures. Audits also serve as a deterrent to future unethical behavior.
Organizations must have a strong code of ethics for their business processes and procurement process. Employees should be given regular training on ethical behavior and the organization’s values. The advantages will allow for greater efficiency and value from procurement activities, enhancing your brand image, and increased loyalty from end-customers.